Economist accuses IMF leadership of being ‘tainted’

As well as the euro zone crisis.

In a resignation letter to the IMF's board and senior staff, dated June 18, Peter Doyle said the IMF's failures in issuing timely warnings for both the 2007-2009 global financial crisis and the euro zone crisis were a "failing in the first order" and "are, if anything, becoming more deeply entrenched."

His letter, a copy of which was seen by Reuters, has brought to light simmering tensions within the IMF over the Fund's credibility, which many worry is threatened by its role in the euro zone crisis.

IMF insiders, who asked not to be identified, told Reuters the concerns are that the Fund has over-stretched by lending to Europe without exercising the same level of independence it would normally apply in bailouts to emerging economies.

Doyle, a division chief for Sweden, Denmark and Israel in the IMF's European Department when he resigned, also accused the Fund's leadership of being "tainted" by a selection process which always ensures that a European is at the helm.


Illegitimacy of the selection process
He said the IMF had been "playing catch-up and reactive roles in the last-ditch efforts to save" the euro zone from the "brink." The IMF is part of a "troika" of international lenders, including the European Commission and European Central Bank, involved in rescue loans to Greece, Ireland and Portugal.

Doyle, who has worked for the IMF for 20 years, said the appointments of the Fund's heads over the past decade "have all-too-evidently been disastrous."

"Even the current incumbent is tainted, as neither her gender, integrity or élan can make up for the fundamental illegitimacy of the selection process," Doyle said of Christine Lagarde's appointment last year as first female head of the IMF.

To be fair, the IMF has acknowledged some of the failures cited by Doyle in reports in 2009 and in 2011 that honed in on mistakes in spotting the roots of the global financial crisis and for not going far enough in warnings to policymakers of the impending crisis.

"Peter's remarks are well documented in the public record, including reports issued by the Independent Evaluation Office, via the triennial review of surveillance, and in many statements by the managing director, including on the findings in these various reports," said IMF spokesman William Murray.

"We have no evidence his views were suppressed, nor (that) any views were suppressed," he added.

More a politician than an economist
The last three heads of the IMF have all resigned before the end of their terms. Horst Koehler stepped down suddenly in 2004 to run for president of Germany. His successor and former Spanish finance minister Rodrigo Rato unexpectedly resigned halfway through his term in 2007 to return to Spain.

Dominique Strauss-Kahn, the former French finance minister, quit last year after he was arrested in May 2011 for alleged criminal sexual assault and attempted rape of a hotel maid, which he denied. Charges have since been dropped.

Strauss-Kahn's push for an IMF role in the euro zone, including approval of big bailouts for Greece and Ireland, and more flexible IMF conditions, caused tensions with some members of the IMF board.

Despite their concerns, many acknowledged that the IMF's involvement was necessary to ensure stability of the global financial system.

Lagarde's appointment just over a year ago followed a hard-fought battle between Europe and emerging economies fed up with the tradition of the head of the IMF always being a European, while the top job at the World Bank has gone to Americans.

"There is certainly a concern that the MD is more a politician than an economist and that she can be swayed by those close to her," one insider said. "But she is certainly seen as a powerful messenger for the Fund's position."  – Reuters

Subscribe to the M&G

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years, and we’ve survived right from day one thanks to the support of readers who value fiercely independent journalism that is beholden to no-one. To help us continue for another 35 future years with the same proud values, please consider taking out a subscription.

Lesley Wroughton
Lesley Wroughton works from Washington. I write about U.S. Foreign Policy for Reuters based in Washington. Opinions are my own and retweets are not an endorsement. Lesley Wroughton has over 1577 followers on Twitter.

Related stories

Dance with the ‘devil’: Why SA has fought off the IMF for so long

The ANC has, until now, always rejected going to the International Monetary Fund, which underscores how bad our economic situation is

South Sudan’s forex shortage highlights broader economic crisis

South Sudan has nearly run out of foreign currency – and this is just the tip of a much bigger economic crisis.

Debt-for-climate swaps are crucial for economic recovery in the developing world

COMMENT: Developing countries face a debt crisis that will only become worse as the Covid-19 pandemic continues, and massive debt relief will inevitably be necessary. The only question is whether it will be designed to address the even larger climate crisis

Alassane Ouattara: In the eye of Côte d’Ivoire’s perpetual succession crisis

His road to the presidency was anchored in contention and acrimony, and if his bid is successful, Alassane Ouattara will have ruled for two decades when all is said and done.

Tito needs the IMF, South Africa doesn’t

The IMF loan is given with false motivation — to provide political cover for entrenched neoliberalism and deep cuts in the public service

South Africa gets $4.3bn IMF loan. In return, the country must reform

The loan, which is repayable over five years at an interest rate of 1.1%, comes with various self-imposed conditions such cutting the public wage bill and rationalising support to the state-owned entities
Advertising

Subscribers only

The shame of 40 000 missing education certificates

Graduates are being left in the lurch by a higher education department that is simply unable to deliver the crucial certificates proving their qualifications - in some cases dating back to 1992

The living nightmare of environmental activists who protest mine expansion

Last week Fikile Ntshangase was gunned down as activists fight mining company Tendele’s expansions. Community members tell the M&G about the ‘kill lists’ and the dread they live with every day

More top stories

Fifteen witnesses for vice-chancellor probe

Sefako Makgatho University vice-chancellor Professor Peter Mbati had interdicted parliament last month from continuing with the inquiry

Constitutional Court ruling on restructuring dispute is good for employers

A judgment from the apex court empowers employers to change their workers’ contracts — without consultation

Audi Q8: Perfectly cool

The Audi Q8 is designed to be the king in the elite SUV class. But is it a victim of its own success?

KZN officials cash in on ‘danger pay for Covid-19’

Leadership failures at Umdoni local municipality in KwaZulu-Natal have caused a ‘very unhappy’ ANC PEC to fire the mayor and chief whip
Advertising

press releases

Loading latest Press Releases…

The best local and international journalism

handpicked and in your inbox every weekday